How Cabotage Rules Affect Truck Drivers

Trucking is a way of life. It is also one of the hardest jobs to keep up with, given the changing regulations and rules in place. In addition to border and traffic laws, there are also regulations in place regarding the transport of freight. In most areas, truck drivers have to abide by cabotage laws. Cabotage rules are the bane of the shipping industry—they make everything more expensive. However, being aware of how these regulations work can allow truck drivers to maximize their profit on the road, while also staying in compliance.  "Cabotage” refers to regulations which limit the movement of cargo between locations within a specific territory. These are the specific rules restricting any freight transport between two points within one country, by a company registered in a completely different country. If a vehicle is registered in one specific country, it then cannot load and unload goods within a different country, as this would violate the rules.

Cabotage rules suggest that a foreign company can’t pick up and transport goods between two points in the U.S., while being registered in another country entirely. These rules do apply to all transportation modes, not only trucking, but with some modification in each of these areas. The regulations in place regarding cabotage are meant to prevent foreign competition within domestic markets, and protect the market within the specified country.

If you have not heard of cabotage, then you may also be familiar with this concept through the terms "interstating" or point-to-point hauling. Drivers can only take goods loaded in the U.S. to Canada or Mexico. This means that a foreign driver can’t pick up goods in the U.S. and transport them within the U.S.. While these regulations may be frustrating to deal with for some drivers, they do attempt to ensure that domestic drivers get paid fairly, given the dollar conversion differences in other countries. There are consequences including hefty fines, if drivers are caught doing this. Some of the basic prohibited activities in U.S. and Canada to keep in mind are:

• You cannot “top up” an international shipment with another U.S. shipment when you have room.
• You cannot solicit domestic shipments while within the country. 
• You cannot reposition an empty trailer between two points within the U.S. if the driver did not enter or depart the country with that trailer.
• You cannot pick up the shipment in the U.S. and deliver to another U.S. location, if you are a foreign driver

Some of the ways this is enforced would be through documents. Using ACI or ACE eManifest systems, carriers provide conveyance information to CBP and CBSA to ensure that they are operating within regulation. This allows customs to see information on all commercial vehicles or equipment entering the country.

Are There Exceptions to Cabotage Rules?

Each country governs over its own rules, so there may be some exceptions specified in the country you are entering. Most notably, in places like Canada, currently there are some exceptions to the cabotage rule, but they require careful study and research. U.S. carriers can transport loads in Canada under some special circumstances. In some cases, there is allowance for foreign-based conveyances used in international commercial transport to be imported into Canada to engage in point to point delivery. Based on CBSA regulations, this is only allowed if: transport is incidental to international traffic of goods (only one incidental move can be made per international trip), the conveyance hasn’t entered for the purpose of an in-transit movement through Canada to another point outside of the country, and the transport does not exceed territorial limits.   

In order for the incidental move to occur, it has to be in the general direction of the delivery place of the international shipment. The load also must be picked up after the delivery of the international load, or if it is part of the return move of the conveyance to the country of origin. This also means that the if the movement is an export, the truck needs to have entered the country empty. Keep in mind that all regulations are always subject to change, so it is essential to keep up with the rules of the country you are heading into at the time you are doing so. 

Cabotage and Cross-Border Transport

Carriers hauling freight across the border can only deliver the goods within one or more U.S. destinations, but they are not allowed to pick up U.S. domestic freight and continue delivering to other U.S. locations. One key impact of these cabotage rules for cross-border trucking would be the empty backhaul created, due to limitations on who can transport freight within specific locations, resulting in drivers who have to head back home empty, wasting both time and gas.

What Are The Effects of Cabotage?

• The Good:

Cabotage rules are in place to protect domestic truck drivers from foreign competition, and ensure at least some wage stability. Due to the dollar conversions in different places, trucking wages vary, so these rules would prevent unfair competition. The rules work in the sense that a trucker from another country that is willing to work for less money, can’t come into the country and take the same routes for less money. The rules also work to lower the risk of accidents, insurance issues or cargo being stolen, because each country regulates drivers within their own territory. Drivers would be more familiar with the regulations in their own country and more likely to adhere to them. 

• The Bad:

A major disadvantage of cabotage rules, however, is that often drivers have to go home empty, wasting gas and impacting the environment negatively. This leads to a lot of deadhead miles, and increased wear and tear on the vehicles. However, an underlying issue here is that manufacturers do not build warehouses or facilities in areas that can held reduce deadhead driving miles, which creates problems for drivers when it comes to saving money, time or gas. Freight also tends to change between seasons, which further complicates the location of drop offs and pick ups. While cabotage does help prevent foreign competition, in theory, it does put a strain on how much drivers earn on their trips. 

How Is Cabotage Regulation Enforced?

Customs in both U.S. and Canada has processes in place to track violations of cabotage rules. CBSA and CBP has authority to audit records by carriers who bring in trailers or conveyances into the country. All bills, invoices and accounts need to be kept on file for a few years after transactions, so there is access to these records if customs needs it. There is also a tip line where reports can be made of suspected cabotage. If found in violation, fines, penalties and even detention is a potential consequence.

Ultimately, the most efficient way to move freight is through a combination of transportation, logistics and automation. The foundations of cabotage rules were designed to protect domestic markets from foreign competition. These restrictions apply to various modes of transport, so it is important to remain aware of what that means for your business. While there are economic and environmental repercussions to these rules, for now they are here to stay. It is beneficial to remember the basics of these hauling rules, in order to work through the barriers and stay in compliance.